Companies need separate China IP strategy

Foreign enterprises with presence in China still don't grasp intricacies of local patent regime, hampering efforts to craft effective intellectual property safeguards there.
Written by Kevin Kwang, Contributor

SINGAPORE--Tech companies looking to break into the Chinese market need to understand intricacies of the local patent regime and effectiveness of filing different types of patents to better safeguard their intellectual property (IP) rights.

As such, they should establish a separate China IP strategy from their global one, said Albert Chan, managing partner of the law offices of Albert Wai-Kit Chan, who was speaking at a talk hosted by the National University of Singapore (NUS).

He said many foreign companies operating in China continue to adopt the mindset of a western practitioner when applying for patents, focusing on their core technologies. Doing so typically results in Chinese authorities feeling intimidated, leading to prolonged scrutiny of the patent application or in it being rejected altogether, Chan explained.

He said China has always feared that upon enacting its Patent Act, the majority of the filings would come from companies of tech-dominant nations looking to invade and exploit the local market for their gains.

Additionally, by officially patenting their technology, Chinese companies would no longer be able to copy from them, he noted.

This "poor man" mentality persists today and underpins many of the intricacies present in the Chinese patent system, yet, many multinational companies have yet to grasp this, the U.S.-based lawyer added.

Focus on the "dots"
According to Chan, China adopts the framework of two major types of patents, namely, the invention patent and utility model (UM) patent. The invention patent is a more comprehensive patent filing which covers the owner's rights for a longer period of time. The UM patent focuses on a prototype's shape and form, rather than the function, are easier to obtain, and typically lasts 10 years, he explained.

UM patents are generally "weak" claims deemed to be unenforceable in countries such as the United States where they will not stand up in court, but are valid and enforceable in China, the lawyer added.

They should form a core part of any company's strategy to safeguard its intellectual property and prevent itself from being ensnared in legal suits domestically, Chan advised.

Describing this strategy as the "dots approach", he said tech companies should look at their products and file UM patents relating to the shape and form--for example, whether it is conical or spherical--but avoid including its functionality.

A foolproof plan would see the company being able to link up the dots and provide enough coverage to avoid patent lawsuits from IP squatters and domestic manufacturers, he noted.

Besides UM patents, tech companies should also apply for invention patents to establish more comprehensive protection for the long run.

Once awarded, the two patent types would overlap and give the organization longer ownership of the patents, Chan said.

He also advised companies to have a global IP strategy in place to supplement the localized China plan for "watertight" protection. This holistic blueprint would be more expensive to implement, he added, though he could not say by how much.

Local business practices prevail
On a broader business level, Chan said relationships play a key role in positioning the foreign company to withstand possible losses through lawsuits or IP leaks.

He underlined the importance of finding "backers" within the government and other influential local personalities to promote the company's position.

Cultivating several of these contacts are important so when one person's power and influence wanes, the company can turn to others for help, he added.

In the event domestic companies do win patent lawsuits against an MNC (multinational corporation), despite it being obvious the former copied the latter's technologies, the foreign enterprise then can use back channels and petition its backers for recourse.

Oftentimes, MNCs would be given other opportunities from upcoming projects to recoup their losses or even make money depending on the reach of their backers, the lawyer said.

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